Manufacturing and retail recovery drives China's solid Q1 growth

EghtesadOnline: A recovery in China's industrial sector, which accounts for about one-third of the economy, drove China's better-than-expected first quarter economic growth as export orders picked up and steel output hit a record.

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18 April 2017

Data on Tuesday from the National Bureau of Statistics showed the industrial sector grew 6.5 percent in the first quarter from a year earlier, its fastest pace since the fourth quarter of 2014, according to Reuters.

On Monday, China reported first quarter growth CNGDP=ECI of 6.9 percent, the quickest in six quarters.

Within the industrial sector, manufacturing grew 7.0 percent compared with the first quarter last year.

Analysts credited growth in exports, in contrast to a contraction in the first three months of 2016, for providing the pick-up in the first quarter.

"It looks to us like the acceleration in 1Q 2017 GDP growth came from electronics exports complementing the 4Q 2016 growth drivers, housing and infrastructure investment," Tim Condon, head of Asia research at ING, said in a note.

ANOTHER BRIGHT SPOT

The other bright spot was the retail and wholesale sector, which also expanded at the fastest pace since the end of 2014. In January-March, the annual growth pace was 7.4 percent, compared with 5.8 percent a year earlier, data showed.

However, growth in the construction industry slowed to 5.3 percent from 5.9 percent at the end of last year and has decelerated for four straight quarters, despite rising investment in infrastructure and the real estate industry.

The property sector grew 7.8 percent in the first quarter, up from 7.7 percent at the end of 2016, while growth in the finance industry rose to 4.4 percent from 3.8 percent.

NBS data showed housing starts picked up in March, growing nearly as fast as sales, which could be a warning sign for overheating in the sector, said Rosealea Yao at Gavekal Dragonomics in Beijing.

"Construction growth is in double digits again, which is not consistent with underlying trends as housing demand has peaked," said Yao.